On 20 June 2012 the Deputy Prime Minister announced plans for
mandatory reporting of greenhouse gas (GHG) emissions for
businesses listed on the London Stock Exchange. This is to take
effect from April 2013 and is expected to impact around 1101
companies. The plan is to require GHG reporting in the
directors' report of quoted company annual reports.
The announcement follows consultation in 2011 on proposed GHG
measurement and reporting requirements which in turn arose out of a
positive obligation on the Government under Section 85 of the
Climate Change Act 2008 (namely that the Government had to either
make regulations requiring directors' reports to include
information about GHG emissions or explain why no such regulations
would be made).
Voluntary reporting has been adopted for some time by many
companies. The Environment Agency's most recent report on
environmental disclosures by quoted companies identifies that in
2009/10 annual reports, 22% were reporting in accordance with
Government guidance. Clearly the Government does not feel that
voluntary measures are adequate. The (updated) Impact Assessment
accompanying this policy proposal states a number of reasons
underpinning Government intervention. It is stated that
"information about companies' exposure to climate
change-related risks is material information for all investors and
other stakeholders; that provision of such information helps
markets to function optimally; and government intervention can
provide for a level of transparency and consistency, as is already
the case for company financial information, which is not being
achieved by individual private initiatives." In particular it
is considered that a company's exposure to climate change
related risks "is essential information for investors who wish
to assess medium to long-term risks."
It is envisaged that regulations will set a minimum level of
reporting, requiring disclosure of a figure for global direct
emissions and a base year and a relevant intensity ratio (e.g.
emissions per £ turnover, per tonne production or other
factor that is relevant to the particular business).
The Government will consult on draft regulations before
implementation (in April 2013).
Following implementation of the regulations for quoted
companies, the Government will consider (in 2016) whether to extend
the requirement to all large companies.
For access to our earlier Lawnow on the report laid before
For the Impact Assessment on the proposal (option 2)
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The desire to simplify the environmental regulatory framework displayed by the Macron Law emphasises the already-existing challenges to strict environmental law in the presence of economic incentives for growth.
In its ground-breaking decision in R v Thames Water Utilities
(2015), the Court of Appeal has signalled a sea-change in penalties
for environmental breaches, with fines for very large commercial
organisations ("VLOs") set to rise exponentially.